Buying from the poor Apr02
International Trade has
long been recognised as an engine for development, but to play this role,
developing countries need better market access for products of interest to
them and support in expanding capacity. The agreement reached at the
Fourth WTO Ministerial Conference in Doha, Qatar (November 2001) to launch
a new round of trade negotiations creates the expectation that the
international trading system will be significantly improved. The hope is
that this will truly stimulate development worldwide, benefiting both
industrialised and developing countries.
Open trade enhances growth
and welfare by improving production efficiency through specialisation
based on comparative advantage. It also stimulates investment efficiency,
due to increased market size and greater access to capital goods.
Productivity rises as a result of the diffusion of technological advances,
faster knowledge growth and allocative efficiency from stronger
competition. However, developing countries can only benefit fully if they
have appropriate institutions, policies, infrastructure and services to
encourage growth in export production capacity.
The comparative advantage
of many developing countries lies in labour-intensive production such as
agriculture and low technology manufactures. Textile quotas are to be
abolished by 2005, but tariff barriers remain high. High tariffs for
agricultural commodities and continued subsidy paid to farmers in the OECD
countries, including the EU, have detrimental effects on agriculture
exports and world commodity prices. Such barriers and subsidy severely
affect developing countries' export earnings and growth possibilities. The
application of phytosanitary requirements serves as an additional barrier.
The small scale indigenous poor farmers, engaged in producing export crops
using labour intensive methods, are seriously disadvantaged by these
barriers and subsidy and fail to access Western markets.
I believe that the WTO
negotiation must focus on the USD 325 billion annual subsidy and trade
barriers so that a way can be found to eliminate them. Initially,
elimination will mean a price rise for food and other agricultural
commodities, adversely affecting vulnerable groups in the poor
food-deficit countries. In this context, greater technical and financial
support is essential to stimulate the production response from higher
prices. At the same time, additional food aid may be needed during the
The EU initiative
"Everything but Arms" is an attempt to provide tariff-free
access to the products of LDCs. A similar response from other OECD
countries would greatly assist developing countries. Sadly, removing
tariffs without eliminating subsidy will continue to distort world prices
resulting in food surpluses from highly mechanised farms in industrialised
countries. Such surpluses are currently dumped in poor countries e.g.
poultry, beef, maize, sugar, rice and milk powder. They result in the
destruction of local farmers already struggling with poor soils, little
rainfall, inadequate infrastructure and no government subsidy!
Over the last seven years,
the International Fund for Agricultural Development (IFAD) has promoted
the emergence of competitive private sector agriculture markets and
assisted smallholder producers in building their capacity to engage in the
new markets on fair terms. For example, IFAD programmes are helping foster
rural market linkages in Mozambique, Tanzania, and Zambia. The programmes
promote investment in smallholder market organisation and knowledge,
storage and transport infrastructure as well as improvement of the policy
and regulatory environment. The aim is to create conditions that can
attract growing private-sector investment and efficient suppliers. The
programmes promote collaboration between government, smallholder
producers, private sector and civil society. A key objective of the
programme is to ensure that the most vulnerable producers, especially
women, can participate in the definition of priorities and benefit fully.
The early experience of
these programmes is very promising. It suggests that it is indeed possible
to find imaginative ways for poor producers to benefit from globalisation,
rather than be further impoverished by it. Let us all help buy from the
poor by selecting their products in our supermarkets - check the source
and give priority to those from developing countries!